Short AUD/USD (From 7-Dec to 12-Dec)
Stopped out on 12-Dec
Real-Time AmpGFX – sold AUD/USD (Thu 7/12/2017 1:08 PM MT)
Sold one unit AUD/USD at 0.7506
Comment
The AUD/USD continues to be dogged by now negative 2yr swap rate spread.
Year-end dollar funding in major currencies has tightened and may be giving the USD a short-term bid.
US labor market continues to tighten, so there is a risk that this spills over to wages growth sooner or later. Friday’s payrolls report poses a risk for upside for the USD id wages are higher than expected
Chinese iron ore prices have fallen in recent days, other base metals prices are softer. Confidence in Chinese growth appears to be declining as Chinese financial conditions tighten and the government addresses excesses in its financial system, albeit cautiously.
CFTC positioning, surprisingly considering the AUD weakness in recent months, still shows significant longs, and Risk Reversals are still relatively high, suggesting that positioning does not appear likely to slow a fall in the AUD, and may even see it fall more significantly.
AUD/USD has broken below its recent range, suggesting down-trend has resumed.
Confidence in the Australian economy remains muted, with the housing market outlook soft.
Political risk in Australia remains high and a change of government in the next year poses a threat to the housing market, given Labor Party policy is to limit negative gearing to new properties and reduce the capital gains tax exemption on investment properties, housing market weakness may persist and deepen next year.
Political risk in the USA is high with a number of issues threatening the USD (Continuing Resolution/ Debt ceiling, Alabama election, Mueller investigation). However, there is considerable confidence that a tax cut bill is likely soon. Perhaps there is so much noise here, that the market is trying to block it out.
Positions
Long a half unit of an XBT derivative at $10,600
Short AUD/USD at 0.7506; s/l 0.7578; t/p 0.7178